On Monday, Indian stocks were in disarray as the Fed’s aggressive monetary policy spooked global financial markets.

Global stock markets extended losses, and domestic equity benchmarks suffered amid fears that a sharp rise in global interest rates would hamper economic growth.

30 BSE Sensex fell 1,153 points, or 1.96%, to 57,680.87. The broader NSE Nifty 50 index fell 337 points, or 1.92%, to 17,221.40.

All 30 Sensex companies are in the red, with Tech Mahindra, Infosys, HCL Technologies, Wipro, Tata Consultancy Services, Tata Steel and Power Grid the biggest laggards.

According to the NSE, all Nifty50 shares are in red. The rate-sensitive real estate index fell 2.8%, while the IT index fell 4.4%.

On Friday, domestic stocks closed with modest gains. Still, the week ended lower as global recession fears intensified amid poor economic data from Asia to Europe and the Americas.

The Sensex edged up 59.15 points to close at 58 at 833.87 on Friday, while the Nifty edged up 36.45 points to 17,558.90.

Asian markets fell on Monday as valuations for stocks and earnings were tested as bond rates and the dollar rose sharply, and the prospect of further rate hikes in the US and Europe grew.

“Stocks across Asia are in deep red after Fed Chairman Jerome Powell said in a speech on Friday that interest rates could continue to rise to keep inflation in check. Powell said that failing to restore price stability will mean more pain,” said Prashanth Tapse, senior vice president of equity research.

Asian shares fell more than 2%, dragged down by technology stocks, while global indexes fell to a one-month low. According to Bloomberg, the Nasdaq 100 and European futures fell at least 1%.

“The main takeaway is that containing inflation is the Fed’s number one priority and the fund’s rate needs to reach a restrictive 3.5% to 4% level,” Jason England, global bond portfolio manager at Janus Henderson Investors, told Reuters.

“Rates will need to stay high until inflation falls to the 2% target, so markets see a rate cut next year as premature.”
Wall Street didn’t want to hear a hawkish message, with S&P 500 futures down 1.1% after falling more than 3.4% on Friday, tech stocks pressured by the prospect of slowing economic growth and Nasdaq futures down 1.5%.

Outside Japan, the Asia-Pacific’s broadest MSCI index fell as much as 2.3%, its biggest drop since June 13, with technology and industrial stocks among the worst performers. South Korea fell 2.3%, and Japan’s Nikkei lost 2.8%.
Stocks in the region have come under selling pressure this year due to rising global interest rates and the impact of China’s COVID-19 lockdown.

Monday’s losses extended the benchmark year-to-date decline in Asia to more than 18%, lagging behind US and European peers.

Isabel Schnabel, a member of the European Central Bank’s board of directors, sounded scathing love over the weekend, warning central banks must act decisively now to fight inflation, even if doing so sends their economies into recession.

EUROSTOXX 50 futures fell 1.7% after the European Central Bank’s rate warning, while Chinese blue chips fell 0.6%.
Aggressive central banks unanimously raised international short-term yields while further inverting the US Treasury curve as markets price in a potential recession.

Indeed, the sell-off in bonds and the inversion of the US Treasury yield curve intensified as monetary policy tightened, underscoring expectations for a recession.

The US dollar index rose to a fresh two-year high of 109.4 in early Asian trade, with a stronger greenback pushing other major currencies to fresh lows and weighing on emerging market currencies.

Still, crude prices climbed on expectations that OPEC will cut output if necessary to support prices, with conflict in Libya and rising demand from soaring gas prices in Europe helping to offset a gloomy outlook for US economic growth.

Stronger crude oil prices and a stronger dollar pushed the rupee to an all-time low of 80.15 on Monday.